tag:blogger.com,1999:blog-4705190583378659608.post702432842174333953..comments2023-11-13T03:52:13.643-05:00Comments on Pragmatism Refreshed: The words of a parrotChristopherhttp://www.blogger.com/profile/17755575167245729981noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4705190583378659608.post-31091473238812460342008-02-09T10:44:00.000-05:002008-02-09T10:44:00.000-05:00Neither the crude oil price increase nor the tax i...Neither the crude oil price increase nor the tax increase will in itself lead to an increase in the price of gasoline, unless it works through the amount of supply coming to the market. <BR/><BR/>If the costs (both of those sorts of cost and whatever others we might wish to list) exceed the price that the market will bear, then companies will stop bring petroleum to the marketplace. Some will go out of buisness,others will shift their activities elsewhere. This won't happen all at once, but gradually, because some firms will enter this crunch with deeper pockets and will wait it out and for other reasons. <BR/><BR/>At any rate, at some point the withdrawal of supply from the market will generate a new equilibrium. <BR/><BR/>My point was just that a lot of people think in automatic "pass-along" terms in connection with both OPEC announcements and taxes. "Oh, that will show up at the pumps." It might. In time through the indirect processes I've mentioned. Or it might already HAVE shown up at the pumps through the anticipatory effect of such processes. <BR/><BR/>But there is no "pass-along" exception to the law of supply and demand. The parrot is right.Christopherhttps://www.blogger.com/profile/17755575167245729981noreply@blogger.comtag:blogger.com,1999:blog-4705190583378659608.post-28250106465111938432008-02-09T10:19:00.000-05:002008-02-09T10:19:00.000-05:00Christopher, I am confused. I gather that you're ...Christopher, I am confused. I gather that you're saying that an increase in crude oil prices does not cause the gasoline companies to charge more for gasoline because an increase in crude oil prices constitutes neither supply nor demand, and supply and demand are the only factors that affect prices. But how can the cost to the seller not be a factor in setting prices, if the seller seeks to make a profit? And, if an increase in crude oil prices does not cause the gasoline companies to charge more for gasoline, then why does an increase in taxes cause them to charge more for gasoline?Henryhttps://www.blogger.com/profile/10646656656732971583noreply@blogger.com